It is time for Hong Kong to get real about water pricing

The wet stuff is too cheap, so residents waste it, but growing demand on the river that supplies the city means we have to learn to conserve it

Tom Holland

BIO

As the writer of the South China Morning Post’s Monitor column, Tom Holland attempts each day to make sense of the latest developments in business, finance and economic affairs in Hong Kong and mainland China.

Back in the 1960s, Hong Kong used to suffer from debilitating water shortages.

The worst was the drought of 1963 to 1964. With almost no rainfall and the limited reservoir capacity running dry, water rationing got tighter and tighter, until eventually the city's taps were allowed to work for just four hours in every four days.

In response, the government came up with some innovative measures to conserve fresh water. It installed a separate piping system to provide seawater for flushing the city's lavatories. It set aside almost a third of Hong Kong's land area as water catchment, and it embarked on a massive construction programme, building the huge Plover Cove and High Island reservoirs.

It also built the world's largest desalination plant at Lok On Pai, near what's now the Gold Coast.

The 1970s energy crisis put paid to that project, so to secure adequate water supplies for the future, the government signed a supply agreement with the mainland, piping in water from the Dongjiang, or East River, 80 kilometres away in eastern Guangdong province.

Today the Dongjiang supplies about 80 per cent of Hong Kong's freshwater consumption for a modest price of about HK$5 a tonne.

However, users in the city don't even pay that much. Although costs have risen steeply in recent years, water tariffs have remained frozen since 1995, with the Water Supplies Department making up the difference in cost.

Thanks to this hefty government subsidy, Hongkongers today enjoy among the lowest water bills in the world. As the first chart shows, according to the International Water Association, we pay only 20 per cent as much as Sydney-siders and just 6 per cent as much as the lakeside inhabitants of Zurich.

As a result, Hongkongers have become profligate water consumers. As the second chart illustrates, on average we use 220 litres a day each, 13 per cent more than Singaporeans and 60 per cent more than the average New Yorker.

[In the 60s' drought] the city's taps worked for just four hours in every four days

Unfortunately, we won't be able to go on splashing around this freely for much longer. With the Dongjiang also the main water supply for Shenzhen, Dongguan and Huizhou, demand on the river has reached unsustainable levels. Water quality is fast deteriorating.

Given that mainland demand is only likely to increase further, Hong Kong's water supply will soon be in doubt again, for the first time in more than 30 years.

Happily, there are steps we can take now to mitigate the future shortage. In a major study published yesterday, independent think tank Civic Exchange called on the government to carry out a comprehensive audit of Hong Kong's full water costs - from source to waste treatment - and rejig its pricing system accurately to reflect its "user pays" principles.

This would have two effects. Firstly, imposing market pricing on big consumers would give them a powerful incentive to use water more conservatively.

Secondly, a price structure that reflected the true cost of water would facilitate investment in new sources of supply.

For example, the government could invest in recycling plants to treat Hong Kong's waste water and feed it back into the drinking water supply.

That might sound a distasteful idea at first, but it is what happens in nature anyway. And there are plenty of precedents for water recycling. In Singapore, for example, 30 per cent of the fresh water flowing from the taps has been recycled, with the government planning to raise that proportion to more than 50 per cent.

Hong Kong should also re-examine desalination, which thanks to new technologies is now far more efficient than in the 1970s.

Sure, it's still an expensive option. But if the alternative is a return to 1960s-style water rationing, Hongkongers will be happy to pay.

@Faisal - a bar of chocolate rising in price from $5.5 to $10 in 5 years is a shade under 11% annual inflation. I hope you are not studying economics at HKU.
Charging the real price of things does not prevent those in need being given a cash handout with which to buy them, so they can decide whether to buy water, wine, chocolate or cigarettes.
Jason

faisaltheonly1 Jul 31st 20135:50am

Dear Mr. Tom,I think your article had not taken into account the 1/6 below poverty population in Hong Kong, and more than 70% of hongkongers who struggle with pay check to pay check every month 12 months a year. Are u a government spokes person or secret agent? All u encourage this govt to do is ask for more and more money from the poor and never give any thing back. They increased the tax on cigarettes in the name of public health but decreased tax to nil for wine. Alcohol kills just as much as smoking does. Just becoz the public would not say no to tax on cigarettes. The they had green groups shouting all about the plastic we used and the govt happily added tax on them too. Is this another one now? Inflation is nearly 50% the govt has been lying to people about it. Does not that add to cost of living? A bar of chocolate that cost 5.5 dollars 5 years ago now cost 10 dollars that's 50%. And we haven't even talked about vegetables, fruits, meat, and all the other fresh produce, they went through the roof. Therefore, please speak for yourself. You could pay as much as you want. We always conserve because we KNOW we have to pay.Faisal Mehmood
HKU

faisaltheonly1 Jul 31st 201310:27pm

@Jason, u maybe right if we calculate according to your way. But to be real ((10-5.5)/5.5)*100=81.1% that's how much it increased. And then remember most grassroots and even middle class so called have nearly stagnant wages which aren't even reported in official figures. Therefore to these people they are paying more with same amount of wages they have. So they are being ripped off. And as to handouts as u so eloquently mentioned, if all we are going to do is give handouts seriously is this the kind of society u want with many beggars waiting for handouts. It seriously makes me nauseating to hear that. What is the use of even more wages and money if all I can buy with it is that which I could yesterday?

whylo Jul 31st 20131:08pm

Water shortage? With 90+% humidity? We have to empty out our dehumidifiers in our flat at least once and sometimes twice a day... There is no shortage of water: only a lack of will and a shortage of imagination. It's time to up the stakes. Surely a technology could be developed that would allow you take this water and filter it so that it's fit for drinking? This would solve the problem and nip this pointless debate in the bud. Imagine HK citizens or whole tower blocks managing their own water catchment at a marginal cost!... Well, I can, not so sure about some interest groups though.